Callback request

Enewsletter sign-up

When should you take out a business equipment loan?

As its name suggests, a business equipment loan is a type of business loan designed to finance new equipment: anything from complex manufacturing machinery to a humble PC or scanner. But when should you start seeking this form of finance?

1 When you need new equipment

Whilst we’ve stated the blindingly obvious for the second time, it really is as simple as this. If your business can’t function without a new piece of kit and if you don’t have the cash on hand to buy outright, you should turn to an equipment loan.

2 When your current equipment is irreparable

Sometimes it’s cheaper to replace equipment than repair it and it’s important to take a long-term view and not simply throw good money after bad. And sometimes, much as you’d like to repair it, a trusted piece of equipment is so old that spare parts can no longer be obtained. If you find yourself in either of these situations, you should start talking to lenders about the cost of an equipment loan.

3 When your equipment needs a major upgrade

Alternatively, you may find that the equipment you already have is good to go for many years to come – but only if you invest in an expensive upgrade. An equipment loan can finance upgrades as well as direct replacements.

4 When you can benefit from substantial tax relief

When you buy new equipment, you can usually claim its full value for tax relief in the first year, sometimes followed by a writing-down allowance. This valuable concession applies whether you purchase it outright or via an equipment loan, making this kind of investment very cost-effective.

5 When leasing equipment is proving very expensive

Many businesses prefer to lease rather than buy equipment, finding this more cost-effective. However, you need to think long-term and work out whether you could find yourself paying more over the years if you lease. Compare the figures carefully and start looking at equipment loans if purchasing works out cheaper.

6 When you don’t want to jump through hoops

Since the financial crash of 2008, bank loans haven’t proved easy to obtain. In many cases, they will want to look at your business plan, articles of incorporation, balance sheet, profit and loss accounts and three years’ tax payments – and even then there’s a good chance the computer will say no. Alternatively, with an equipment loan from an alternative lender like Cashsolv the application process will be much more streamlined and you’ll stand a much higher chance of success.

7 When you want to maintain your working capital

Even if you have cash on hand to purchase the equipment you need, you may prefer to obtain a loan and keep some money in the bank as a cushion against cash flow crises. This is a particularly good strategy if your business is highly profitable and growing fast. Perversely, this is precisely when you will face the biggest cash flow challenges.